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Linear Programming (LP) is a mathematical optimization technique.

By optimization technique, it refers to a method which attempts to


maximize or minimize some objective, for example, maximize profits
or minimize costs.

Linear programming is a subset of a larger area of
mathematical optimization procedures called mathematical
programming, which is concerned with making an optimal set of
decisions.

In any LP problem, certain decisions need to be made.
These decisions are represented by decision variables which are used
in the formulation of the LP model.


BASIC STRUCTURE OF A LINEAR PROGRAMMING
PROBLEM

The basic structure of an LP problem is either to maximize
or minimize an objective function, while satisfying a set of
constraining conditions called constraints.

Objective function. The objective function is a mathematical
representation of the overall goal stated in terms of the decision
variables. The firms objective and its limitations must be expressed
as mathematical equations or inequalities, and these must be linear
equations and inequalities.

Constraints. Constraints are also stated in terms of the decision
variables, and represent conditions which must be satisfied in
determining the values of the decision variables. Most constraints in a
linear programming problem are expressed as inequalities. They set
upper or lower limits, they do not express exact equalities; thus
permit many possibilities.

Resources must be in limited supply. For example, a
furniture plant has a limited number of machine-hours available;
consequently, the more hours it schedules for furnitures, the fewer
furnitures it can make.

There must be alternative courses of action, one of which
will achieve the objective.
LINEAR PROGRAMMING ASSUMPTIONS AND GENERAL
LIMITATIONS

When using Linear Programming to solve a real business
problem, five assumptions (also referred to as limitations) have to be
made.

Linearity. The objective function and constraints are all linear
functions; that is, every term must be of the first degree. Linearity
implies the next two assumptions.

Proportionality. For the entire range of the feasible output, the rate
of substitution between the variables is constant.

Additivity. All operations of the problem must be additive with
respect to resource usage, returns, and cost. This implies
independence among the variables.

Divisibility. Non-integer solutions are permissible.

Certainty. All coefficients of the LP model are assumed to be known
with certainty. Remember, LP is a deterministic model.


Computational Techniques to Overcome the Limitations of LP

There are at least three other mathematical programming
techniques that may be used when the assumptions (limitations)
above do not apply to the problem. These are:

Integer programming
Dynamic programming
Quadratic programming


The Red Gadget-Blue Gadget Problem

We shall be using one particular example to illustrate most
of the LP approaches and concepts. We shall call this the red gadget-
blue gadget problem.

A company produces gadgets which come in two
colors: red and blue. The red gadgets are made of steel and
sell for 30 pesos each. The blue gadgets are made of wood
and sell for 50 pesos each. A unit of the red gadget
requires 1 kilogram of steel, and 3 hours of labor to
process. A unit of the blue gadget, on the other hand,
requires 2 board meters of wood and 2 hours of labor to
manufacture. There are 180 hours of labor, 120 board
meters of wood, and 50 kilograms of steel available. How
many units of the red and blue gadgets must the company
produce (and sell) if it wants to maximize revenue?


The Graphical Approach

Step 1. Define all decision variables.

Let: x
1
= number of red gadgets to produce (and sell)
x
2
= number of blue gadgets to produce (and
sell)

Step 2. Define the objective function.

Maximize R = 30 x
1
+ 50 x
2
(total revenue in pesos)

Step 3. Define all constraints.

(1) x
1
50 (steel supply
constraint in kilograms)
(2) 2 x
2
120 (wood supply
constraint in board meters)
(3) 3 x
1
+ 2 x
2
180 (labor supply constraint in man
hours)
x
1
, x
2
0 (non-negativity
requirement)

Step 4. Graph all constraints.

Step 5. Determine the area of feasible solutions.
Step 6. Determine the optimal solution.



The shot-gun approach

List all corners (identify the corresponding coordinates), and pick the
best in terms of the resulting value of the objective function.

(1) x
1
= 0 x
2
= 0 R = 30 (0) + 50 (0) = 0

(2) x
1
= 50 x
2
= 0 R = 30 (50) + 50 (0) = 1500

(3) x
1
= 0 x
2
= 60 R = 30 (0) + 50 (60) = 3000

(4) x
1
= 20 x
2
= 60 R = 30 (20) + 50 (60) = 3600
(the optimal solution)

(5) x
1
= 50 x
2
= 15 R = 30 (50) + 50 (15) = 2250

The contour-line approach

Assume an arbitrary value for the objective function, then
graph the resulting contour line.

Let R = 3000

30 x
1
+ 50 x
2
= 3000
x
1
= 0 x
2
= 60
x
2
= 0 x
1
= 100

If you are maximizing, draw contour lines parallel to the
first contour line drawn, such that it is to the right of (and above) the
latter, and touches the last point (points) on the area of the feasible
solutions.

If minimizing, go the opposite direction.


Step 7. Determine the binding and non-binding constraints.

Observing graphically, we find that the steel supply
constraint is non-binding, implying that the steel supply will not be
completely exhausted. On the other hand, both the wood supply and
labor supply constraints are binding. By producing 20 units of the
red gadget and 60 units of the blue gadget, wood and labor will be
completely used.


LINEAR PROGRAMMING: GRAPHICAL SOLUTION
(Minimization Problem)

Example: Mindoro Mines

To illustrate the use of the graphical approach to solving
linear programming minimization problems, we shall use the
Mindoro Mines example. If you already have basic understanding of
the graphical method from the example in Session 03, you should
have little difficulty appreciating the following application.

Mindoro Mines operates 2 mines: one in Katibo and the
other on Itim Na Uwak Island. The ore from the mines is
crushed at the site and then graded into high-sulfur ore
(ligmite), low-sulfur ore (pyrrite) and mixed ore. The
graded ore is then sold to a cement factory which requires,
every year, at least 12,000 tons of ligmite, at least 8,000
tons of pyrrite, and at least 24,000 tons of the mixed ore.

Each day, at a cost of P22,000 per day, the Katibo mine
yields 60 tons of ligmite, 20 tons of pyrrite, and 30 tons of
the mixed ore. In contrast, at the Itim Na Uwak Island
mine, at a cost of P25,000 per day, the mine yields 20 tons
of ligmite, 20 tons of pyrrite, and 120 tons of the mixed
ore.

The management of Mindoro Mines would like to
determine how many days a year it should operate the two
mines to fill the demand from the cement plant at minimum
cost. What are the binding constraints?

The Graphical Approach

Step 1. Define all decision variables.

Let x
1
= number of days (in a year) to operate the
Katibo mine
x
2
= number of days (in a year) to operate the
Itim Na Uwak Island mine

Step 2. Define the objective function.
X1
X1
X1
X1

Minimize C = 22000 x
1
+ 25000 x
2
(total cost of
operating the mines in pesos)

Step 3. Define all constraints.

(1) 60 x
1
+ 20 x
2
12000 (ligmite demand in
tons)
(2) 20 x
1
+ 20 x
2
8000 (pyrrite demand in
tons)
(3) 30 x
2
+ 120 x
2
24000 (mixed ore demand in
tons)
(4) x
1
365 (maximum
number of days in a year)
(5) x
2
365 (maximum number
of days in a year)
x
1
, x
2
0 (non-negativity
requirement)
Step 4. Graph all constraints.

Step 5. Determine the area of feasible solutions.

For Steps 4 and 5, please refer to the following graph.

Step 6. Determine the optimal solution.

Using the shot-gun approach, we list down the following corners or
extreme points (with their respective coordinates):

(1) x
1
= 365 x
2
= 365 C = 22000 (365) + 25000
(365) = 17,155,000

(2) x
1
= 365 x
2
= 108.75 C = 22000 (365) +
25000 (108.75) = 10,748,750

(3) x
1
= 78.33333 x
2
= 365 C = 22000 (78.33333) + 25000 (365) =
10,848,333

(4) x
1
= 100 x
2
= 300 C = 22000 (100) + 25000
(300) = 9,700,000

(5) x
1
= 266.66667 x
2
= 133.3333 C = 22000
(266.667)+25000 (133.333) = 9,200,000

The Optimal Solution
Step 7. Determine the binding and non-binding constraints.

Observing graphically, we find that binding constraints are those
associated with pyrrite and mixed ore production. Total production
of these two items will exactly match the requirements of the cement
factory. Meanwhile, ligmite production will be in excess of the
minimum requirement of 12000 tons by about 6,667 tons. Likewise,
total available operating days will not be completely utilized.